• Home/
  • Fixed Income

David Fuller and Eoin Treacy's Comment of the Day
Category - Fixed Income

    Our 2021 Global Outlook

    This report from Bridgewater may be of interest to subscribers. Here is as section:

    Email of the day on debt

    In the 1960s David Cameron's father, Ian who was the head of the Gilts department, taught me when I was working. at Panmure Gordon, that states never repay their debts. They issue new bonds to refinance old ones when they come to maturity. Apart from President Andrew Jackson in 1835, there is no modern example of a state repaying the National Debt. It is about time that experts and journalists stop causing anxiety among older people who think that states are burdening their children and grandchildren with future debt repayments.

    Read entire article

    Email of the day on real returns

    Where can I find a chart plotting real returns of interest rates Thanks in advance.

    Read entire article

    Treasury Yields Surge to One-Year High as Reflation Bets Thrive

    This article by Vivien Lou Chen, Stephen Spratt and Greg Ritchie for Bloomberg may be of interest to subscribers. Here is a section:

    None of this is welcome news for those who bought into U.S. auctions last week. Investors snapped up a combined $68 billion of 10- and 30-year debt at yields more than 10 basis points lower than current levels. This week brings a $27 billion 20-year bond auction on Wednesday.

    In the U.K., 30-year yields hit the highest level since March after the country hit a milestone in its vaccination program, supporting calls for easing of social restrictions. Germany’s benchmark yield climbed to levels last seen in June amid a significant slowdown in virus cases.

    The selloff was broad, with even Italian bonds -- which would typically outperform haven assets such as German bunds when credit spreads tighten and stocks climb -- under pressure. The announcement of a new 10-year benchmark bond sale to take place via syndication saw yields also advance five basis points on Monday. Still, demand on Tuesday set a record of more than 110 billion euros ($133 billion).

    Read entire article

    Almost Daily Grant's

    Thanks to a subscriber for this edition of James Grant’s free eletter. Here is a section:

    A similar trend is visible in the more speculative corner of the corporate bond market. Analysts from Barclays reported last week that average duration in high-yield debt has jumped to 6.7 years, compared to 6.1 years at the beginning of 2020.  Similarly, the effective yield on the ICE BofA US High Yield Index reached a record low 4.12% yesterday, down from 5.19% a year ago.  Meanwhile, Bloomberg reported Friday that a voracious hunger for yield has left junk bond investors “calling up companies and pressing them to borrow, instead of waiting for bankers to bring new deals to them.” 

    “It’s kind of wacky,” Jim Shepard, head of investment-grade bond issuance at Mizuho in New York, told the Financial Times yesterday. “At a time when you would want greater insurance against a rise in interest rates, [people] are buying something more exposed to it.” 

    Read entire article

    Email of the day on choosing what to write about

    Prompted by a recent subscriber’s comment I would just like to mention that I have been a subscriber for many years and can happily say that I have always considered it money well spent. I read and listen to your market commentary most days and very much appreciate your calm insight and intuitive free thinking. I find your choice of topic and charts chosen on any particular day, to be more powerful for the very reason they are your choice of topic and charts chosen for that particular day. Please keep up the great work. Wishing you and your family the very best.

    Read entire article

    Email of the day on gold and fighting the Fed

    Thursday's article, “Gold Plunges the most in Four Weeks…” is greatly appreciated.  Despite all the uncertainties and volatility of the past two months you report that you have retained your gold investments and are looking forward to “increase [your] position”.  You express even more confidence in silver.

    The attached St Louis Fed Chart showing an accelerating measure of inflation provides good evidence to support your position, long term, but long-term charts, both weekly and monthly show gold is still over-extended. 

    If “fighting The Fed” is to be avoided, a bullish gold position may be a courageous act when the world’s central banks will be united in their determination to frustrate gold investors.  There may have been some evidence of that last year.  Also, since silver prices are more easily manipulated, that market seems to be more vulnerable to a combined central bank manoeuvre?

    Common sense says that the present world-wide, money creation will end in disaster.  In that situation, precious metals are a safe haven but, in the short term, and even the medium term, risks in those markets appear to be very high. A prudent plan to cover both outcomes seems desirable.  That plan should, perhaps, also incorporate different allocations to gold and silver. Further guidance by you would be invaluable.

    Read entire article

    Email of the day on the US Dollar

    I am a not so new subscriber, I started in 2010. And your service is very valuable for me, so thank you! - Your commentary starts my day.

    I understand that your view is that the dollar will depreciate over the coming years. Since I am based in the euro area, and have approx. 50% of my investments in USD, this is a topic that interest me very much.

    I enclose a report from Nordea Bank, with a slightly different view. I would be very interested to know your take here.

    Read entire article

    Silver, GameStop Sink as Investor Frenzy Shows Signs of Cooling

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    Most-active silver futures declined as much as 5.5% to $27.81 an ounce on the Comex after the CME Group said margins will rise to $16,500 per contract from $14,000, effective Feb. 2. The decision was based on “the normal review of market volatility to ensure adequate collateral coverage," it said.

    “Fundamentally I don’t believe that there are any significant short positions in the silver market, as the outlook for silver is robust this year, coming off a strong performance in 2020," Wendt said.

    As the frenzy built, BlackRock Inc.’s iShares Silver Trust recorded an unprecedented $944 million net inflow on Friday, followed by another $551 million on Monday after a since-removed post appeared on the WallStreetBets forum that encouraged traders to pile into the exchange-traded product. That move now appears to be fizzling out, with some on Reddit urging their fellow investors to back away from silver.

    “We suspect that prices will remain volatile," James Steel, chief precious metals analyst at HSBC Securities (USA) Inc., said in a note before the margin increase was announced. “Beyond this week, and possibly sooner, we believe the new entrants into the market may tire and begin to liquidate silver holdings, with a commensurate price impact. Buyer beware!"

    Read entire article